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March 16, 2010 Authorized for Public Release Appendix 1: Materials used by Mr. Sack 125 of 146 March 16, 2010 Authorized for Public Release Class II FOMC - Restricted FR Material for FOMC Presentation: Financial Market Developments and Desk Operations Brian Sack March 16, 2010 126 of 146 March 16, 2010 Authorized for Public Release 127 of 146 Class II FOMC – Restricted FR Exhibit 1 (1) Implied Federal Funds Rate Percent 2.5 4.5 11/3/09 (2) Treasury Yields Percent 2-yr 5-yr 10-yr FOMC 12/01/08 04/01/09 08/01/09 12/01/09 12/15/09 2.0 1/26/10 3.5 3/12/10 1.5 2.5 1.0 1.5 0.5 0.0 04/01/10 08/01/10 12/01/10 04/01/11 08/01/11 12/01/11 0.5 08/01/08 Source: Federal Reserve Bank of New York Source: Bloomberg (3) Breakeven Inflation Rates Percent BPS 4 FOMC 3 (4) European Debt Spreads to German Debt* 450 400 350 2 Greece Portugal Spain FOMC 300 250 1 200 150 0 100 5-yr Spot 5-yr 5-yr Forward -1 -2 08/01/07 03/01/08 50 10/01/08 05/01/09 12/01/09 Source: Federal Reserve Board of Governors BPS 400 New York California USA FOMC 350 300 250 200 150 100 50 0 01/01/09 Source: Bloomberg 05/01/09 09/01/09 05/01/09 09/01/09 01/01/10 *10-yr Maturity; Source: Bloomberg (5) CDS in Federal and State Debt 450 0 01/01/09 01/01/10 Indexed to 100=8/1/08 150 145 140 135 130 125 120 115 110 105 100 08/01/08 (6) US Dollar GBP/Dollar EUR/Dollar FOMC Dollar Appreciation 12/01/08 04/01/09 08/01/09 Source: Federal Reserve Board of Governors, Bloomberg 12/01/09 March 16, 2010 Authorized for Public Release 128 of 146 Class II FOMC – Restricted FR $ Billions 1750 Exhibit 2 (7) Federal Reserve Short-Term Liquidity Facilities (8) LIBOR-OIS Spreads BPS 400 PDCF 1500 1250 AMLF FOMC 350 TSLF 300 FX Swaps 150 1-mo TAF 500 200 CPFF 750 250 PCF 1000 100 3-mo 250 50 0 08/01/08 12/01/08 04/01/09 08/01/09 12/01/09 Source: Federal Reserve Bank of New York (9) TALF Outstanding Balances 60 50 08/01/09 12/01/09 (10) ABS Spreads BPS 600 3-yr Credit Card 3-yr Auto Prime 3-yr Student Loan 500 40 30 FOMC 400 20 300 10 0 200 -10 100 -20 0 06/25/09 09/25/09 12/25/09 Source: Federal Reserve Bank of New York Indexed to 100= 8/1/08 04/01/09 700 Loans Extended Cumulative Prepayment Loans Outstanding -30 03/25/09 12/01/08 Source: Bloomberg $ Billions 70 0 08/01/08 08/01/08 12/01/08 04/01/09 08/01/09 12/01/09 Source: JP Morgan Chase BPS (11) S&P 500 (12) Corporate Bond Spreads 2500 BPS 1200 110 100 FOMC 90 1000 2000 FOMC 800 1500 600 80 1000 400 70 60 50 08/01/08 12/01/08 04/01/09 08/01/09 12/01/09 Source: Bloomberg 500 High Yield (LHS) Investment Grade (RHS) 0 08/01/08 12/01/08 04/01/09 08/01/09 12/01/09 Source: Bank of America 200 0 March 16, 2010 Authorized for Public Release 129 of 146 Class II FOMC – Restricted FR Exhibit 3 (13) Weekly Pace of MBS Purchases (14) Weekly Pace of Agency Debt Purchases $ Billions $ Billions 35 Actual* Projected Path at Dec FOMC 5 Actual* Projected Path at Dec FOMC 30 4 25 3 20 15 2 10 1 5 0 12/31/08 03/31/09 06/30/09 09/30/09 12/31/09 03/31/10 0 12/31/08 03/31/09 06/30/09 09/30/09 12/31/09 03/31/10 *Monthly average; Source: Federal Reserve Bank of New York *Monthly average; Source: Federal Reserve Bank of New York (15) MBS Spreads* BPS BPS 175 (16) Agency Debt Spread* 175 OAS to Treasury OAS to Swap 150 125 150 125 100 100 75 75 50 50 25 25 0 0 -25 -25 -50 08/01/00 -50 08/01/00 08/01/03 08/01/06 08/01/09 * Fannie Mae fixed-rate current coupon spreads; Source: Barclays Capital 08/01/03 08/01/06 08/01/09 *Fannie Mae 5-yr benchmark spread to Treasury; Source: JP Morgan Chase (17) Percent of Outstanding MBS Owned by SOMA* (18) MBS Fails* $ Billions Percent 600 100 90 80 70 60 50 40 30 20 10 0 500 400 300 200 3/10/10 100 3.5 4 4.5 Coupon 5 5.5 *Fannie Mae 30-yr; Source: Federal Reserve Bank of New York 6 0 01/01/02 01/01/04 01/01/06 01/01/08 01/01/10 *4-wk moving average; Source: FR2004 March 16, 2010 Authorized for Public Release 130 of 146 Class II FOMC – Restricted FR Exhibit 4 (19) Domestic SOMA Portfolio Composition $ Billions 7 Agency MBS 2500 Agency Debt Agency Debt Total Portfolio 5 Coupons 1500 Treasuries Agency MBS 6 TIPS 2000 (20) SOMA Modified Duration Years 4 Bills 3 1000 2 500 1 0 01/03/07 01/03/08 01/03/09 01/03/10 Source: Federal Reserve Bank of New York 0 01/01/90 01/01/95 01/01/00 01/01/05 01/01/10 Source: Federal Reserve Bank of New York (21) Change in Size of SOMA from Asset Redemptions Levels of SOMA Assets ($ Billions, Par) Cumulative Change (from April 1, 2010) 6/30/2007 4/1/2010 Through 2011 Through 2015 Agency MBS* 0 1,130 -187 -415 Agency Debt 0 170 -63 -130 Total non-Treasury 0 1,300 -250 -545 Treasury Debt 786 771 -139 -436 Total 786 2,071 -389 -981 * Estimates reflect BlackRock’s prepayment assumptions; Source: Federal Reserve Bank of New York (22) Alternate Paths for the Size of SOMA* $ Billions (23) Change in Size of SOMA under Alternative Treasury Redemption Strategies 2500 Forecast Cumulative Change (from April 1, 2010) 2000 Through 2011 1500 Full Redemptions Reinvest into Bills 0 2006 2008 2010 2012 2014 No Treasury Redemptions Full Treasury Redemptions -32 Reinvest into Bills and 2-, 3-yr Notes 500 -103 Reinvest into Bills and 2-yr Notes 1000 -139 0 2016 *Forecast as of 3/3/2010; Source: Federal Reserve Bank of New York Source: Federal Reserve Bank of New York March 16, 2010 Authorized for Public Release Appendix 2: Materials used by Mr. Stockton 131 of 146 March 16, 2010 Authorized for Public Release 132 of 146 Private Housing Construction (Thousands of units, seasonally adjusted annual rate, except where noted) 2009 Category 2009 Q2 Q3 2009 Q4r Dec. 2010 Jan.p Jan.r Feb.p Total Starts Permits 554 572 540 529 587 573 559 598 573 653 591 621 611 622 575 612 Single-family Starts Permits Adjusted permits1 Permits backlog2 445 435 440 58 425 406 418 59 498 460 478 56 481 474 488 58 481 505 520 58 484 507 519 57 502 504 517 58 499 503 507 57 Multifamily Starts Permits Adjusted permits1 Permits backlog2 109 137 132 40 115 123 123 39 89 113 114 37 78 124 125 40 92 148 148 40 107 114 114 38 109 118 118 38 76 109 109 39 Regional starts3 Northeast Midwest South West 62 97 278 117 63 90 261 126 66 107 289 124 59 100 292 108 60 94 309 110 66 91 312 122 73 94 317 127 66 104 268 137 r revised p preliminary 1. Adjusted permits equal permit issuance plus total starts outside of permit-issuing areas. 2. Number outstanding at end of period. Seasonally adjusted by staff. Excludes permits that have been cancelled, abandoned, expired, or revoked. Not at an annual rate. 3. Sum of single-family and multifamily starts. Source: Census Bureau. Private Housing Starts and Permits (Seasonally adjusted annual rate) Millions of units 2.0 2.0 1.8 1.8 Single-family starts 1.6 1.6 1.4 1.4 1.2 1.2 Single-family adjusted permits 1.0 1.0 .8 .8 .6 .6 Feb. .4 .4 .2 .0 Multifamily starts 1999 2000 2001 2002 2003 Feb. 2004 2005 2006 2007 2008 Note. Adjusted permits equal permit issuance plus total starts outside of permit-issuing areas. Source: Census Bureau. 2009 2010 .2 .0 March 16, 2010 Authorized for Public Release Appendix 3: Materials used by Mr. Dudley 133 of 146 March 16, 2010 Authorized for Public Release 134 of 146 Figure 1: Core CPI Inflation with and without Shelter 3-Month Annualized (Percent) 6 3-Month Annualized (Percent) 6 5 5 Core without Shelter 4 4 3 3 2 2 1 1 0 0 -1 Core -1 -2 Shelter -2 -3 2005 -3 2006 2007 2008 2009 2010 Source: Bureau of Labor Statistics Figure 2:Core PCE Components Before and After Sep-2008 After (Annualized Inflation) 15% 10% Education Services Used Motor Vehicles Educational Books 5% New Motor Vehicles Housing Jewelry and Watches Communication Public Transportation 0% -5% Telephone and Fax Equipment Accommodation Household Dishes and Utensils -10% Furniture and Furnishings Multimedia Equipment -15% -15% -10% -5% Source: Bureau of Economic Analysis, FRBSF/FRBNY Staff 0% 5% 10% 15% Before (Annualized Inflation) Note: Before (Dec-05 to Sep-08); After (Sep-08 to Jan-10) March 16, 2010 Authorized for Public Release Appendix 4: Materials used by Mr. Madigan 135 of 146 March 16, 2010 Authorized for Public Release Class I FOMC – Restricted Controlled (FR) Material for Briefing on Monetary Policy Alternatives Brian Madigan March 16, 2010 136 of 146 March 16, 2010 Authorized for Public Release 137 of 146 Page 1 of 10 January FOMC Statement Information received since the Federal Open Market Committee met in December suggests that economic activity has continued to strengthen and that the deterioration in the labor market is abating. Household spending is expanding at a moderate rate but remains constrained by a weak labor market, modest income growth, lower housing wealth, and tight credit. Business spending on equipment and software appears to be picking up, but investment in structures is still contracting and employers remain reluctant to add to payrolls. Firms have brought inventory stocks into better alignment with sales. While bank lending continues to contract, financial market conditions remain supportive of economic growth. Although the pace of economic recovery is likely to be moderate for a time, the Committee anticipates a gradual return to higher levels of resource utilization in a context of price stability. With substantial resource slack continuing to restrain cost pressures and with longer-term inflation expectations stable, inflation is likely to be subdued for some time. The Committee will maintain the target range for the federal funds rate at 0 to ¼ percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels of the federal funds rate for an extended period. To provide support to mortgage lending and housing markets and to improve overall conditions in private credit markets, the Federal Reserve is in the process of purchasing $1.25 trillion of agency mortgage-backed securities and about $175 billion of agency debt. In order to promote a smooth transition in markets, the Committee is gradually slowing the pace of these purchases, and it anticipates that these transactions will be executed by the end of the first quarter. The Committee will continue to evaluate its purchases of securities in light of the evolving economic outlook and conditions in financial markets. In light of improved functioning of financial markets, the Federal Reserve will be closing the Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility, the Commercial Paper Funding Facility, the Primary Dealer Credit Facility, and the Term Securities Lending Facility on February 1, as previously announced. In addition, the temporary liquidity swap arrangements between the Federal Reserve and other central banks will expire on February 1. The Federal Reserve is in the process of winding down its Term Auction Facility: $50 billion in 28-day credit will be offered on February 8 and $25 billion in 28-day credit will be offered at the final auction on March 8. The anticipated expiration dates for the Term Asset-Backed Securities Loan Facility remain set at June 30 for loans backed by new-issue commercial mortgage-backed securities and March 31 for loans backed by all other types of collateral. The Federal Reserve is prepared to modify these plans if necessary to support financial stability and economic growth. March 16, 2010 Authorized for Public Release 138 of 146 Page 2 of 10 March FOMC Statement—Alternative A 1. Information received since the Federal Open Market Committee met in January suggests that economic activity has continued to strengthen and that the deterioration in the labor market is abating. Household spending is expanding at a moderate rate but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit. Business spending on equipment and software has risen significantly. However, investment in nonresidential structures is still contracting, housing activity continues to be sluggish, and employers remain reluctant to add to payrolls. In light of the weakness in labor markets and prospects for a subpar economic recovery, the Committee judges that further monetary stimulus is warranted. 2. With substantial resource slack continuing to restrain cost pressures and with longer-term inflation expectations stable, inflation is likely to be subdued for some time. 3. To provide further support to mortgage lending and housing markets and to promote a more robust economic recovery in a context of price stability, the Committee decided to extend its program for purchasing agency mortgage-backed securities. The previously announced purchases of $1.25 trillion of those securities will be executed by the end of this month, and the Committee now anticipates that an additional $150 billion of such securities will be purchased during the second quarter. The Federal Reserve has been purchasing about $175 billion of agency debt, and those transactions will be executed by the end of this month. The Committee will continue to evaluate its purchases of securities in light of the evolving economic outlook and conditions in financial markets. The Committee will maintain the target range for the federal funds rate at 0 to ¼ percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels of the federal funds rate for an extended period. 4. In light of improved functioning of financial markets, the Federal Reserve has been closing the special liquidity facilities that it created to support markets during the crisis. The only remaining such program, the Term Asset-Backed Securities Loan Facility, is scheduled to close on June 30 for loans backed by new-issue commercial mortgage-backed securities and on March 31 for loans backed by all other types of collateral. March 16, 2010 Authorized for Public Release 139 of 146 Page 3 of 10 March FOMC Statement—Alternative B 1. Information received since the Federal Open Market Committee met in January suggests that economic activity has continued to strengthen and that the labor market is stabilizing. Household spending is expanding at a moderate rate but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit. Business spending on equipment and software has risen significantly. However, investment in nonresidential structures is declining, and housing starts have been flat at a depressed level. While bank lending continues to contract, financial market conditions remain supportive of economic growth. Although the pace of economic recovery is likely to be moderate for a time, the Committee anticipates a gradual return to higher levels of resource utilization in a context of price stability. 2. With substantial resource slack continuing to restrain cost pressures and longer-term inflation expectations stable, inflation is likely to be subdued for some time. [The Committee expects that over time and with appropriate monetary policy, inflation will run at rates consistent with price stability.] 3. The Committee will maintain the target range for the federal funds rate at 0 to ¼ percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels of the federal funds rate for an extended period. To provide support to mortgage lending and housing markets and to improve overall conditions in private credit markets, the Federal Reserve has been purchasing $1.25 trillion of agency mortgage-backed securities and about $175 billion of agency debt; those purchases are nearing completion, and the remaining transactions will be executed by the end of this month. The Committee will continue to monitor the economic outlook and financial developments and will employ its policy tools as necessary to promote economic recovery and price stability. 4. In light of improved functioning of financial markets, the Federal Reserve has been closing the special liquidity facilities that it created to support markets during the crisis. The only remaining such program, the Term Asset-Backed Securities Loan Facility, is scheduled to close on June 30 for loans backed by new-issue commercial mortgage-backed securities and on March 31 for loans backed by all other types of collateral. March 16, 2010 Authorized for Public Release 140 of 146 Page 4 of 10 March FOMC Statement—Alternative C 1. Information received since the Federal Open Market Committee met in January indicates that economic activity has continued to advance and that the labor market is beginning to stabilize. Consumer spending is expanding, business spending on equipment and software has risen appreciably, and firms have brought inventory stocks into better alignment with sales. While bank lending continues to contract, financial market conditions remain supportive of economic growth. With a sustainable economic recovery now under way, the Committee anticipates a gradual return to higher levels of resource utilization. 2. Higher energy prices have been reflected in a recent modest pickup in inflation, but underlying inflation pressures remain muted. The Committee will adjust the stance of monetary policy as necessary over time to ensure that longer-term inflation expectations remain well anchored and that inflation outcomes are consistent with price stability. 3. The Committee will maintain the target range for the federal funds rate at 0 to ¼ percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels of the federal funds rate for some time [, at least through the end of the second quarter]. The Federal Reserve has been purchasing $1.25 trillion of agency mortgage-backed securities and about $175 billion of agency debt; those purchases are nearing completion, and the remaining transactions will be executed by the end of this month. 4. Although the federal funds rate is likely to remain exceptionally low for some time, the Federal Reserve will need to begin to tighten monetary conditions at the appropriate time to prevent the [development of inflationary pressures][buildup of financial imbalances and inflationary pressures over the medium to long run]. Over coming months, the Federal Reserve will continue to test its tools for draining reserves. In due course, those operations will be scaled up to drain more significant volumes of reserve balances, and then the Federal Reserve will increase the interest rate paid on reserves and its target for the federal funds rate. The Committee anticipates that any sales of the Federal Reserve’s securities holdings would be gradual and would not occur until after policy tightening is under way and the economic recovery is sufficiently advanced. The Committee will monitor the economic outlook and financial developments in determining the timing and sequence of its measures for policy firming and will employ its tools as necessary to promote economic recovery and price stability. 5. In light of improved functioning of financial markets, the Federal Reserve has been closing the special liquidity facilities that it created to support markets during the crisis. The only remaining such program, the Term Asset-Backed Securities Loan Facility, is scheduled to close on June 30 for loans backed by new-issue commercial mortgage-backed securities and on March 31 for loans backed by all other types of collateral. March 16, 2010 Authorized for Public Release 141 of 146 Page 5 of 10 March FOMC Statement—Alternative C’ 1. Information received since the Federal Open Market Committee met in January indicates that economic activity has continued to advance and that the labor market is beginning to stabilize. Consumer spending is expanding, business spending on equipment and software has risen appreciably, and firms have brought inventory stocks into better alignment with sales. While bank lending continues to contract, financial market conditions remain supportive of economic growth. With a sustainable economic recovery now under way, the Committee anticipates a gradual return to higher levels of resource utilization. 2. Higher energy prices have been reflected in a recent modest pickup in inflation, but underlying inflation pressures remain muted. The Committee will adjust the stance of monetary policy as necessary over time to ensure that longer-term inflation expectations remain well anchored and that inflation outcomes are consistent with price stability. 3. The Committee will maintain the target range for the federal funds rate at 0 to ¼ percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels of the federal funds rate for some time [, at least through the end of the second quarter]. The Federal Reserve has been purchasing $1.25 trillion of agency mortgage-backed securities and about $175 billion of agency debt; those purchases are nearing completion, and the remaining transactions will be executed by the end of this month. 4. Although the federal funds rate is likely to remain exceptionally low for some time, the Federal Reserve will need to begin to tighten monetary conditions at the appropriate time to prevent the [development of inflationary pressures][buildup of financial imbalances and inflationary pressures over the medium to long run]. Over coming months, the Federal Reserve will continue to test its tools for draining reserves. In due course, those operations will be scaled up to drain more significant volumes of reserve balances, and then the Federal Reserve will increase the interest rate paid on reserves and its target for the federal funds rate. To reduce the size of its balance sheet over time, the Federal Reserve has been allowing all agency debt and agency mortgagebacked securities to roll off as they mature or are prepaid, and beginning on April 1 the Federal Reserve will begin to redeem all maturing Treasury securities. The Committee will also be assessing the possibility of gradual sales of the Federal Reserve’s securities holdings to accomplish further reductions in the size of its portfolio. The Committee will monitor the economic outlook and financial developments in determining the timing and sequence of its measures for policy firming and will employ its tools as necessary to promote economic recovery and price stability. 5. In light of improved functioning of financial markets, the Federal Reserve has been closing the special liquidity facilities that it created to support markets during the crisis. The only remaining such program, the Term Asset-Backed Securities Loan Facility, is scheduled to close on June 30 for loans backed by new-issue commercial mortgage-backed securities and on March 31 for loans backed by all other types of collateral. March 16, 2010 Authorized for Public Release 142 of 146 Page 6 of 10 Table 1: Overview of Alternative Language for the March 16, 2010 FOMC Announcement January FOMC A Economic Activity March Alternatives B C/C´ Recent Developments “has continued to strengthen” “has continued to strengthen” “has continued to advance” Labor Market abating deterioration, employers reluctant to hire abating deterioration but unemployment high appears to be stabilizing but unemployment high is beginning to stabilize Outlook pace of recovery “likely to be moderate” further monetary stimulus warranted by prospects for subpar recovery pace of recovery “likely to be moderate” sustainable recovery “now under way” Inflation Key Factors substantial resource slack, stable expectations substantial resource slack, stable expectations modest pickup due to energy prices, but underlying pressures remain muted Outlook “likely to be subdued for some time” “likely to be subdued for some time” policy adjustments will ensure outcomes “consistent with price stability” Timing and Sequence of Policy Firming Forward Guidance “exceptionally low... for an extended period” “exceptionally low... for an extended period” “exceptionally low... for some time” Overview of Exit Strategy* --- --- reserve draining, then increased IOER and target funds rate Agency MBS Purchases Amount $1.25 trillion $1.4 trillion $1.25 trillion Duration executed by the end of the first quarter extended through the end of the second quarter executed by the end of this month Focus of Policy Evaluation “its purchases of securities” * “its purchases of securities” “will employ its policy tools as necessary” “timing and sequence of its measures for policy firming” Alternative C indicates an expectation that asset sales will be gradual and will not be initiated until after policy firming has begun. Alternative C´ states that the Federal Reserve will be redeeming all maturing Treasury securities and points to the possibility that gradual asset sales could commence fairly soon. March 16, 2010 Authorized for Public Release 143 of 146 Page 7 of 10 DIRECTIVE The directive from the January meeting and draft language for the March directive are provided below. JANUARY FOMC MEETING The Federal Open Market Committee seeks monetary and financial conditions that will foster price stability and promote sustainable growth in output. To further its long-run objectives, the Committee seeks conditions in reserve markets consistent with federal funds trading in a range from 0 to ¼ percent. The Committee directs the Desk to purchase agency debt and agency MBS during the intermeeting period with the aim of providing support to private credit markets and economic activity. The timing and pace of these purchases should depend on conditions in the markets for such securities and on a broader assessment of private credit market conditions. The Desk is expected to execute purchases of about $175 billion in housing-related agency debt and about $1.25 trillion of agency MBS by the end of the first quarter. The Desk is expected to gradually slow the pace of these purchases as they near completion. The Committee anticipates that outright purchases of securities will cause the size of the Federal Reserve's balance sheet to expand significantly in coming months. The Committee directs the Desk to engage in dollar roll transactions as necessary to facilitate settlement of the Federal Reserve’s agency MBS transactions to be conducted through the end of the first quarter, as directed above. The System Open Market Account Manager and the Secretary will keep the Committee informed of ongoing developments regarding the System's balance sheet that could affect the attainment over time of the Committee's objectives of maximum employment and price stability. March 16, 2010 Authorized for Public Release 144 of 146 Page 8 of 10 MARCH FOMC MEETING — ALTERNATIVE A The Federal Open Market Committee seeks monetary and financial conditions that will foster price stability and promote sustainable growth in output. To further its long-run objectives, the Committee seeks conditions in reserve markets consistent with federal funds trading in a range from 0 to ¼ percent. The Committee directs the Desk to purchase agency debt and agency MBS during the intermeeting period with the aim of providing support to private credit markets and economic activity. The timing and pace of these purchases should depend on conditions in the markets for such securities and on a broader assessment of private credit market conditions. The Desk is expected to execute purchases of about $175 billion in housing-related agency debt by the end of March and about $1.4 trillion of agency MBS by the end of the second quarter. The Committee anticipates that outright purchases of securities will cause the size of the Federal Reserve’s balance sheet to expand significantly in coming months. The Committee directs the Desk to engage in dollar roll transactions as necessary to facilitate settlement of the Federal Reserve’s agency MBS transactions to be conducted through the end of the second quarter, as directed above. The System Open Market Account Manager and the Secretary will keep the Committee informed of ongoing developments regarding the System’s balance sheet that could affect the attainment over time of the Committee's objectives of maximum employment and price stability. March 16, 2010 Authorized for Public Release 145 of 146 Page 9 of 10 MARCH FOMC MEETING — ALTERNATIVES B AND C The Federal Open Market Committee seeks monetary and financial conditions that will foster price stability and promote sustainable growth in output. To further its long-run objectives, the Committee seeks conditions in reserve markets consistent with federal funds trading in a range from 0 to ¼ percent. The Committee directs the Desk to complete the execution of its purchases of about $1.25 trillion of agency MBS and of about $175 billion in housing-related agency debt by the end of March. The Committee directs the Desk to engage in dollar roll transactions as necessary to facilitate settlement of the Federal Reserve’s agency MBS transactions. The System Open Market Account Manager and the Secretary will keep the Committee informed of ongoing developments regarding the System’s balance sheet that could affect the attainment over time of the Committee’s objectives of maximum employment and price stability. March 16, 2010 Authorized for Public Release 146 of 146 Page 10 of 10 MARCH FOMC MEETING — ALTERNATIVE C´ The Federal Open Market Committee seeks monetary and financial conditions that will foster price stability and promote sustainable growth in output. To further its long-run objectives, the Committee seeks conditions in reserve markets consistent with federal funds trading in a range from 0 to ¼ percent. The Committee directs the Desk to complete the execution of its purchases of about $1.25 trillion of agency MBS and of about $175 billion in housing-related agency debt by the end of March. The Committee directs the Desk to engage in dollar roll transactions as necessary to facilitate settlement of the Federal Reserve’s agency MBS transactions. The Committee directs the Desk to reduce the System’s securities holdings by continuing the current practice of not reinvesting the proceeds from MBS prepayments and from maturing agency MBS and agency debt and, beginning on April 1, 2010, by not reinvesting the proceeds from maturing Treasury securities. The System Open Market Account Manager and the Secretary will keep the Committee informed of ongoing developments regarding the System's balance sheet that could affect the attainment over time of the Committee's objectives of maximum employment and price stability.
@FedFRASER